Residents of Hawaii, Idaho, Maine, and New Mexico will be charged sales tax at checkout starting April 1, 2017. Iowa, Louisiana, Mississippi, Missouri, Nebraska, Rhode Island, South Dakota, Utah, Vermont and Wyoming were added to the list earlier this year. A 2014 report by the National Conference of State Legislatures estimated that states lost an estimated $23.3 billion in 2012 from an inability to collect sales tax from online and catalog purchases.
The legality of collecting sales tax in regards to catalog purchases (and by extension, online retailers) stems from a 1992 Supreme Court ruling in the case Quill Corp. v. North Dakota. The court ruled that states couldn’t force retailers to collect sales tax for these purchases unless the retailer has a physical presence within the state. However, as Amazon has expanded they have built more and more warehouses, data centers, and other facilities in numerous states which makes them responsible for collecting sales tax.
Even though a retailer may not be obligated to collect sales tax, the consumer themselves may still be legally obligated to pay. Many states have a use tax which is often the same percentage as a sales tax. This tax is meant to cover situations where consumers would purchase goods from out-of-state or from sellers other than retail stores. This tax is rarely enforced, but people who purchase goods in states with this law are nonetheless obligated to pay it.
Although Amazon’s collection of sales tax takes effect on April 1, 2017, five states can still enjoy purchasing items on Amazon without paying it: Alaska, Delaware, Oregon, Montana, and New Hampshire don’t collect any sales tax at all. If you’re in one of the few remaining states that will be affected by this policy change, you might want to get in some last minute shopping while you can.
What do you think of online retailers charging sales tax? Is the lack of a sales tax charge enough of an incentive to get you to shop elsewhere? Do you pay sales tax on purchases made at sites which don’t automatically collect it? Let us know in the comments below!